Muni Mayhem: Prospects of Taxes Roil Market

But chance of levies on heretofore tax-free bonds may be discounted in price slide.

Municipal bonds, usually the most stolid of markets, have been going through one of their periodic paroxysms. This time it isn't being caused by the baseless predictions of doom from some clueless Cassandra, but by those who have the actual ability to wreak havoc, our esteemed representatives in Washington.

In the negotiations to avoid going over the fiscal cliff, there were suggestions that some tax may be levied on high-income investors in what heretofore had been tax-exempt municipal securities. As a result, prices of...